‘High cost of failure in UAE’

Posted on Thu Dec 19 2013

The cost of failure is high for entrepreneurs in the UAE, a panel of women entrepreneurs said at the final day of the SME Congress & Expo.

“If you look at many other countries in the world, the cost of buying a license is relatively low. You can start in your back room and get your license,” said Stevi Lowmass, founder of Essential Soaps and former managing director at networking group Heels & Deals. “For me to start my manufacturing business, I had to get a license, premises and a sponsor. You have to sell a lot of soaps to cover that cost…The cost of failure is so much higher here because all the costs are upfront.”

The panelists were responding to a question from the audience about the fear of failure among women entrepreneurs. Lucy D’abo, managing partner at Dabo & Co, added that the financial and legal outcomes of failing as an entrepreneur in the market were daunting: “There isn’t this cushion that you would see in more mature markets where bankruptcy is more acceptable – not that an entrepreneur sets out to go bankrupt. It would be great to have more support around that because it does seem to be quite a grey area.” A UAE bankruptcy law, which is pending approval, is expected to help alleviate some of these concerns when it comes into effect.

Souad Al Hosani, president of Nexus Business Services, agreed that the high cost of starting a business eventually translates to into a high cost of failure: “That is why we, as a business service provider, advise clients before they open a business in the UAE to come earlier, explore the market and choose the right people to be their sponsor and partners,” she added. Understanding the market, identifying competitors and having a support system in place can help minimize the costs.

Thriving environment
The panelists also highlighted that UAE was a great environment for women entrepreneurs to thrive. Lowmass noted that while she did face challenges while setting up a business, none of them were due to being a woman. “I have had more difficulties in the UK and South Africa than over here,” she said. Speaking to SMEinfo at the sidelines of the event, she added that being a female entrepreneur in the UAE was actually a positive advantage and other women entrepreneurs would attest to that. “People are quite fascinated,” she noted.

Mona Tavassoli, founder & director of Mom Souq and Mompreneurs Middle East, said one of the main supporting factors of being a businesswoman in the UAE is that there are several other female entrepreneurs operating around you. “It is very inspiring. Imagine if you were the only one around you running a business, the level of confidence would have been much lower than when you see 200 other women who are doing it.”

While banks are often cited as less receptive to women entrepreneurs, Lowmass said that the investor community in the country can be quite supportive. “I don’t think they see it as a man/woman thing,” she noted, explaining that investors focus on their return on investment and the soundness of the business plan.

The challenges that do exist appear to be more entrepreneurial than gender-related. According to Tavassoli, these include lack of a) confidence to take risks b) knowledge and access to mentorship, and c) access to funds or information on how to attain them.

She added that authorities can also help make it easier for entrepreneurs to enter the market by reducing the cost of licensing and setting up. In the UAE, it is mandatory for companies to buy/rent an office space before they can operate as a licensed organisation. Being allowed to work from home can help alleviate some of the start-up and operational costs. Lowmass agreed: “I was very lucky when I started Essential Soaps because I was the first non-national woman they allowed to start the business from home. I had to get a license [and office space] but they allowed me to work with a general trading license so that I could get the products cleared, and allowed me to manufacture from a home environment,” instead of leasing a manufacturing facility. “They can start extending that to others,” she said.

Lowmass added that there have been some changes over the years and the economic departments are becoming more flexible to make it easier for entrepreneurs to set up and grow their businesses. The government is also trying to create a more conducive entrepreneurial & SME ecosystem so we can expect to see more positive developments in the future, she noted.

When asked what types of improvement in regulations could help entrepreneurs, she said, “I’d like to see that there is less reliance on having local sponsors in small businesses. I don’t mind having a shareholding, but maybe have small shareholdings because sponsor fees [can be quite high]. I would also like to see funds from big [initiatives] – such as Khalifa Fund for Enterprise Development and Dubai SME, who have been amazingly supportive but have been unable to help anybody but a national – being extended to non-nationals.”

About the Author

SMEinfo is an all-in-one digital resource and business community for start-ups, entrepreneurs and SMEs in the UAE.

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